A century or so ago, Great Britain possessed a huge fleet of merchant ships transporting various types of goods from the East. These ships were owned by merchants and if a ship was lost, a merchant had to bear the total loss. Merchants hence decided to get together and distribute their goods between each other's ships so that even if one ship was lost, the rest of the goods would be safe. With time this practice of the physical transfer of goods was stopped and instead they put aside a sum of money collectively, which was given to the ship owner if a ship sank.
In insurance too this sharing of risk occurs.
The development of the Sri Lankan Insurance Industry
The insurance industry was nationalized in 1961, by the Government taking over a number of insurance companies operating in the country at that time. These included a large number of local as well as representative offices of foreign insurance companies.
The state monopoly of the insurance industry continued till 1986 with the Sri Lanka Insurance Corporation acting as the only supplier of insurance. This was converted to a state controlled oligopoly with the creation of the National Insurance Corporation.
In 1987 as a result of the adoption of a market based economic policy by the Government, the insurance sector was opened out to the private sector.
The industry was previously regulated by a Controller of insurance, but now is under purview of the Insurance Board of Sri Lanka which has been vested with greater powers to regulate the industry.
